Is the Sharing Economy Changing Consumption?

You hear a lot these days about the sharing economy and collaborative consumption, especially if you spend time in northern California. I spent last week in San Francisco, where people told me about AirBnB, which allows people to share their homes or apartments with visitors, RelayRides, Share My Ride and getaround, which allow people to rent their cars for a few hours or days, and ThredUp, where parents buy, sell and share children’s clothes, toys and books. Meantime, Prosper.com and Lending Club connect people who want to lend money with those who want to borrow. With peer-to-beer lending, who needs Citi or Bank of America?

Last year, Fast Company published a thoughtful and well-reported overview of the sharing economy by Danielle Sacks under the headline: “Thanks to the social web, you can now share anything with anyone anywhere in the world. Is this the end of hyperconsumption?” More than 3 million people from 235 countries have “couch-surfed,” she reported, and more than 2.2 million bike-sharing trips are taken each month.

Many sharing websites, like Freecycle and Couch Surfing, are nonprofits. Seattle and Berkeley have tool libraries, where people can borrow a lawn mower, power saw or drill. But other sharing ventures are business. Some analysts expect the sharing economy to generate real money, Fast Company reported:

Gartner Group researchers estimate that the peer-to-peer financial-lending market will reach $5 billion by 2013. Frost & Sullivan projects that car-sharing revenues in North America alone will hit $3.3 billion by 2016.

I’ve always liked the idea of sharing-–hey, I paid attention back in kindergarten–-because of its obvious environmental benefits: The more we share, the less stuff we need to own. But I’ve been skeptical of the claim that the sharing economy would end–or even slow down–hyperconsumption. My week in San Francisco made me less of a skeptic. This idea just might spread.

Partly I’ve changed my thinking because of my own experience. For the first time, I stayed in an apartment that I found through AirBnB. Because I planned to spend six days in San Francisco, staying in a downtown hotel struck me as unappealing. I liked the idea of exploring a neighborhood, making my own breakfast and saving a few dollars. So I found a studio in Potrero Hill for $140/night that I rented from a woman named Kepa Askenasy. I chose it in part because Kepa was rated a “SuperHost” by Air BnB and had about 70 favorable reviews from renters on the site. It’s the top floor unit, below.

My digs in San Francisco

I felt some trepidation as I boarded the plane for SFO-–this wasn’t as predictable as staying at a Marriott, or at one of the Joie de Vivre hotels in SF, which I like a lot–-but everything worked out really well. The apartment was small but comfortable, and Kepa kindly provided maps, neighborhood guides and her own advice on local dining and shopping. I explored Potrero Hill, enjoyed a long walk to downtown for one meeting, got around on buses and the Muni, went for a run with my pal Adam Lashinsky (buy his new book!) who lives nearby and hung out at Farley’s, the local coffee shop.

The peer reviews on AirBnB took a lot of risk out of the transaction, for Kepa and me. She got paid in advance. I was reassured by her ratings. Afterwards, we rated one another, to guide future renters and lessors. She told me by email:

Airbnb emphasizes customer service, and accountability on both sides of the equation (host/ guest) through their transparent review process. It’s been exceptionally easy to handle the transactions. My guests seem to be happy with their side of the deal too.

Should Marriott and Hilton be worried by AirBnB? Probably not, but it’s not going to help their business.

Later in the week, I had lunch with Beth Trask of Environmental Defense Fund who told me that she’s renovating a home in Berkeley. And, yes, when she needs tools, she visits the tool library. She told me:

The Berkeley tool library is a real community gem. I’ve borrowed everything from rakes and hammers to drain snakes, sanders and power tools. The crusty old guys who run it love to tease me — since I never know the right names for the tools I’m looking for and they usually have to explain them to me – but they always help me out. I’ve saved so much money and time, and have learned a lot about tools along the way.

On a visit with Net Impact, a great organization of MBAs, young professionals and college students who want to use the power of business to change the world for the better, several young staffers told me that they thought the sharing economy was a real phenomenon among younger people. Liz Maw, the executive director, was planning to rent a car the following day from getaround, but was stymied by a couple of glitches. But others in the group had used car sharing services, which provide peer reviews as well as insurance. Most cars, it turns out, sit around as much as 90% of the time.

I’d readily use AirBnB again, and I’m prepared to try car sharing. I’ve been using Freecyle for years [see my 2007 Fortune.com column, The amazing Freecycle story]. It strikes me that free or government-backed sharing programs, like Capital Bikeshare in Washington, D.C., function as gateway drugs for people who have forgotten the lessons they learned in kindergarten. They can move from there to Zipcar and from there to sharing their own car or apartment, and borrowing from others.

Barring some miracle in space, there’s only one planet for us to inhabit. And by mid-century, roughly three billion more people will join us. With this math, it’s not hard to predict that businesses that figure out more efficient ways to use the earth’s resources will thrive. Also, urban areas will inevitably become more densely populated, which really favors the sharing economy. If you’ve got more people in a neighborhood, it’s easier to increase the number of bikes, tools, local farmers markets or clothing swaps you can offer. You can also make your offers more convenient—more shared cars in the lot or on a nearby street. Density deepens community and creates demand for shared products and services. Owning a car outright, on the other hand, becomes a bigger and bigger expense and burden to maintain and park.

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Peer-to-peer carsharing is also becoming more and more popular in Europe now, especially as cars tend to be less status symbols than just means of transportation. There are p2p carsharing services in nearly all big European countries now, like our own in Germany on http://www.rent-n-roll.de/ and http://www.whipcar.com/ in Great Britain.

Collaborative Consumption in general seems to be an interesting idea, and we are waiting to see how it will define 21st century economy.

Marc - an interesting and balanced article. As you may know Time Magazine determined Collaborative Consumption would be one of the “10 Ideas That Will Change the World” (17 March 2011).

It is now widely accepted that our world is overcrowded, with 2011 being the year that the world’s population hit 7 billion, just a dozen years after hitting the 6 billion mark in 1999, and twenty four years after hitting 5 billion in 1987. With the world population increasing at this rate the usage of the earth's precious natural resources is coming under increasing pressure each day.

We launched, in the UK, RentMyItems.com in September of last year as an online UK marketplace that facilitates person to person renting of items owned among friends, family and communities. Our aims are not only to allow users to make money by renting out household items and save money by not spending on new products, maybe a greater aim is to increase usage of products creating a more “green” and lesser carbon footprint as the fewer products consumers buy the less the impact on the environment caused by waste.

Your quotes stats of Gartner Group researchers estimating that the peer-to-peer financial-lending market will reach $5 billion by 2013 is interesting and ties in with figures we have ourselves seen. As part of our own launch we commissioned research through ICM Research Ltd that revealed an estimated £2.9bn had been spent on items in the UK in the last 12 months that have been rarely used or haven’t been used at all, including £650M spent by women on clothes and £240M on DIY tools.

With the current economic challenges that many households in the major consumption countries are experiencing making and saving money seems a good idea, and using fewer of the world’s limited natural resources to make new goods obviously is.

Thank you, Paulo, Mark and Carissa, for your comments. There a lot of skepticism about the sharing economy. To some people, it even feels un-American! I will check out both WhyTrusted.com and freegler.com and perhaps write about them in a future post.

I grew up in Telluride, Colorado, a tiny mountain town that has long had a Free Box. It was just a series of labeled shelving on the sidewalk across from the post office (under an awning) but it was a constant community point for dropping off and discovering stuff, including a lot of ski gear. People automatically kept it clean out of pride and it often contained designer clothing or very good gear. It probably wouldn't function with more than 2,000 inhabitants, but it was a good model to grow up with.

There is definitely going to be more demand for sharing related services, and why not. There are now 7 billion people in the world, and we certainly don't need 7 billion lawnmowers, which is why we created http://freegler.com - a new site which allows you to rent your things to those around you, for example gardening and camping equipment, kitchen appliances, even share your dog with someone for a walk!
Mark - http://freegler.com

Great to know that you’ve learned about, and even better, experienced Collaborative Consumption.

It really is a mind shifting movement that will have a growing impact in the way we live and consume. Not only it will change how the economy works and how we define growth, but will also have a major impact on environment and sustainability.